Trump Opens Highways to Tax-Free Red Diesel as Supply Stays Tight

President Donald Trump signed an executive order Oct. 5 temporarily allowing tax-exempt red-dyed diesel to enter the U.S. highway market, but the change does not address the diesel supply shortage driving fuel costs higher.

Highway diesel normally carries a federal excise tax of 24.3 cents per gallon. If the full tax saving reaches customers, the policy could reduce costs by roughly that amount, easing some pressure on trucking and logistics expenses.

The measure changes how existing fuel can be taxed and used. It does not increase refinery output or add diesel to wholesale markets. U.S. refineries are operating at high rates while refined-fuel flows face disruptions, keeping diesel prices elevated.

The national average highway diesel price reached $6.528 per gallon on Sept. 22 and remained about $6.315 on Tuesday. Red-dyed diesel is mainly distributed through agricultural and industrial channels, where many highway truck stops lack the storage and fueling systems needed to serve road vehicles.

A rapid shift by trucking operators toward those channels could also strain supplies during the North American fall harvest, when farms rely heavily on tax-exempt diesel.